The U.S. imposed semiconductor export controls on China. Now a key EU nation is set to follow suit

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An employee stands by cables inside a ASML Twinscan XT1000 lithography machine, during manufacture at the ASML factory in Veldhoven, Netherlands.

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“Given the technological developments and the geopolitical context, the government has come to the conclusion that the existing export control framework for specific equipment used for the manufacture of semiconductors needs to be expanded, in the interests of national and international security,” the country’s Foreign Trade Minister Liesje Schreinemacher said in a letter to parliament Wednesday.

Although the letter does not reference China, it comes after pressure from the White House, which in 2022 imposed export controls that limit Beijing from accessing certain semiconductor chips. At the time, American officials recognized that if other countries did not impose similar restrictions, the export controls would lose effectiveness over time.

Since 2018, the U.S. has reportedly been asking the Dutch government to stop ASML shipping its extreme ultraviolet lithography machines to China. ASML has not shipped the equipment to China so far.

In the wake of the Dutch government’s announcement, ASML said in a statement that, “it will take time for these controls to be translated into legislation and take effect.”

“Based on today’s announcement, our expectation of the Dutch government’s licensing policy, and the current market situation, we do not expect these measures to have a material effect on our financial outlook,” the company said Wednesday, adding that “the additional export controls do not pertain to all immersion lithography tools but only to what is called ‘most advanced’.”

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ASML said that it is not clear what the Dutch government means by the “most advanced” machines.

However, it said the regulations mean that it will need to apply for a license to export its so-called immersion deep ultraviolet (DUV) lithography machine, which is used to manufacture memory chips. These chips are used in a plethora of devices, from smartphones to laptops and servers, and could ultimately be used for artificial intelligence applications. 

Last month, ASML said that a former employee in China had misappropriated data related to its proprietary technology.

China has been working to bolster its domestic semiconductor industry, but it remains far behind the likes of Taiwan, South Korea and the U.S.

The Chinese Ministry for Foreign Affairs said on Thursday that it opposes the politicization of economic and trade cooperation and hopes that the Netherlands maintains an objective stance, according to Reuters.

Speaking to CNBC’s Street Signs on Thursday, Anna Rosenberg, head of geopolitics at the Amundi Institute, said that the latest announcement from the Netherlands is “a big deal” for President Joe Biden.

“The U.S. has been trying to get the EU to side with its policies towards China for a while, and it has significantly more leverage with the EU now than prior to the [Ukraine] war, simply because the EU is now pretty much entirely dependent on its security on the US,” she added.

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